Question from Micheline
I am now 69 years old and I am not withdrawing any amount from my RRSP. I wait until the year I turn 71 to transfer my RRSP to a RRIF, and disburse the mandatory annual minimum amounts. If I make this transfer before I turn 71, would I still be required to pay these amounts?
Regardless of the age at which you decide to convert your RRSP to a RRIF, you will need to start paying out at least the minimum amount due. “However, no minimum RRIF withdrawal is required in the calendar year in which the RRSP is converted into a RRIF, since the RRIF balance on 1er January of the calendar year concerned is then zero ”, specifies Shirley Marquis, partner and senior director of financial planning and taxation at SFL Gestion de patrimoine Nord-Ouest.
She adds that the main question you should ask yourself before making this conversion concerns your cost of living and your monthly or annual monetary needs. Once you have done this exercise, it will then be easier to assess what the additional financial need is.
This is why financial planning or a projection of your retirement income, including a disbursement strategy, is strongly recommended, even if you are already retired. If you have a spouse, do this exercise in pairs to maximize the possibilities, by using income splitting for example. Moreover, if your spouse is younger, we can use his age to calculate the minimum withdrawal so that it is less.
In addition, it is possible to transform only part of your RRSP into a RRIF, for example only $ 100,000 out of $ 400,000. This would allow you to cover your immediate needs without paying too much.
Finally, you could also consider converting your RRSP into a life annuity. The older we get, the more advantageous this option is. “It helps protect against early disbursement or even capital depletion before death, while providing peace of mind. In fact, we no longer have to manage our investments, since the insurance company will take care of it, ”adds Shirley Marquis. Be aware that there are also hybrid plans that combine lifetime income and some growth from the markets.
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